No doubt over time some coal mines will deliver fewer tons, some closed down, is this offset by new contract wins in coal? I don't know. If the current mines only decline on average by 1/3 by 2034, a few contract wins happen between now and then, and aggregates/minerals at NAM continue anywhere near the current pace, this will work out quite well.

On another note, bisti delivered 3.7m tons in 2017. Delivered 1.2 m tons first half 18' and is expected to deliver a similar number for all of 18' vs 17'. Therefore, bisti should deliver around 2.5m tons 2h 18'. Also, per mgmt, should ramp to 5-6 m tons/year in 2019.

Coal/diesel/salaries/inflation are all accelerating of late and affect the contract escalations. This should cause slight margin expansion.

I agree that this is cheap and like the risk/reward here, I probably just think that the downside is bigger and the upside smaller. In lignite, losing contracts is painful and I am just not sure how much scope there is for new contract wins in the space. Lignite production is 65M-70M tons and NC is doing 37M of that, so how many more contracts can they realistically go get. I think growth has to come from limestone (and any other materials they can expand into). It's just going to be slow as these operations are more limited and provide smaller fees.

Fair enough spos. Absent aggressive capital return, I see this doing well, not fantastic. That said, they are going to have a ton of cash relative to ev burning holes. The debt's almost gone and irrelevant at these levels. Assuming next year is a normal capex year vs this year's ultra high level ... what to do with excess cash should be top of mind. They claim in their docs to have the shareholder returns for taxable investors in mind.

If NC mgmt is paying attn it's painfully obvious they should be loading up on buybacks at these prices.

Absent any extraneous costs from centennial or otherwise not compensated by reclamation activities at Liberty, second half earnings should be indicative of what 19' will bring. We have MLMC and bisti ramping to normal. We have new limestone contracts increasing in pace. Capital allocation decisions becoming acute, virtually no debt.

In case anyone missed it from last q's print:

"At the consolidated operations, Mississippi Lignite Mining Company's pre-tax income in the second half of 2018 is expected to increase substantially over the second half of 2017 and the first half of 2018, primarily as a result of a reduction in the cost per ton of coal delivered during the second half of 2018. In general, cost per ton delivered is lowest when the power plant requires a consistently high level of coal deliveries, primarily because costs are spread over more tons. Historically, periods of reduced or fluctuating deliveries, such as during planned or unplanned power plant outages or periods of fluctuating demand for electricity generated by the plant, have adversely affected Mississippi Lignite Mining Company's tons delivered, resulting in an increase in cost per ton delivered and reduced profitability. Customer demand in the second half of 2018 is expected to return to higher levels because fewer plant outage days are expected compared with the prior year. Improved income in the second half of the year, primarily in the third quarter, is expected to offset the lower income in the first half of 2018 resulting in full-year 2018 income at Mississippi Lignite Mining Company that is comparable to 2017. If customer demand does not improve as expected at Mississippi Lignite Mining Company, it could unfavorably affect North American Coal's 2018 earnings significantly."

I agree that this is cheap and like the risk/reward here, I probably just think that the downside is bigger and the upside smaller. In lignite, losing contracts is painful and I am just not sure how much scope there is for new contract wins in the space. Lignite production is 65M-70M tons and NC is doing 37M of that, so how many more contracts can they realistically go get. I think growth has to come from limestone (and any other materials they can expand into). It's just going to be slow as these operations are more limited and provide smaller fees.

IMO these are really smart thoughts. Thanks.

Anything is a buy at the right price, but a US lignite coal producer needs to be very cheap. I think there's a real risk of $0 terminal value within a decade.

I agree that this is cheap and like the risk/reward here, I probably just think that the downside is bigger and the upside smaller. In lignite, losing contracts is painful and I am just not sure how much scope there is for new contract wins in the space. Lignite production is 65M-70M tons and NC is doing 37M of that, so how many more contracts can they realistically go get. I think growth has to come from limestone (and any other materials they can expand into). It's just going to be slow as these operations are more limited and provide smaller fees.

IMO these are really smart thoughts. Thanks.

Anything is a buy at the right price, but a US lignite coal producer needs to be very cheap. I think there's a real risk of $0 terminal value within a decade.

Excluding centennial,NC is trading at 6x ntm eps ish and less than that on a eps/ev fcf/ev for cy 19'.

Curious why you believe lignite (or all?) coal may be a zero in ten years? We've had around a 35% drop in the last ten. In the attached the prediction suggests 20% drop from 16-50', which seems too small. I've seen other predictions in the -20 to -50% range next twenty years.

Personally, I don't see how we can get to a zero on coal within ten years without a federal mandate and I don't see that happening in ten years.

Two other questions.

1. How long will mine mouth lignite coal (all of nacco's current production) be around vs coal in general, the utility will be shut down concurrently? I certainly see reduced power needs on the assets over ten years and some % shut down completely. If the power needs for the area have a high availability of renewables for example.

2. Is coal a national security issue at some point? If coal use was reduced by 2/3 from here... would we need those remaining facilities in good shape maintained considering none are being built? Would we expect a higher or lower % of these remaining to be mine mouth?

From attached:"IEEFA’s long-term outlook, through 2050, is for a steady, downward decline in coal production as demand from utilities decreases. The EIA is in general agreement. Its long-term outlook has overall U.S. coal production declining to 583 million tons by 2050, a 20% drop from 2016, a projection that would mean a 50 percent decline from a 2006 peak of 1.2 billion tons. Over the long term, IEEFA also sees the U.S. coal industry becoming even smaller than theseprojections suggest, because coal-fired power plants could be retired at a more rapid pace than the EIA assumes."

At 29.xx/share we may see a 4x eps and fcf /EV multiple in cy 2019. Ev should be about 143m after this print at 29.xx/share.

0/30/2018CLEVELAND, Oct. 30, 2018 /PRNewswire/ --

Highlights:

Revenues increased to $31.4 million, up 43.3% over Q3 2017Income from continuing operations before income tax increased to $10.7 million, up 78.9% over Q3 2017Earnings per share from continuing operations increased to $1.33/share from $0.49/share in Q3 2017NACCO Industries, Inc. (NYSE: NC) today announced consolidated income from continuing operations of $9.2 million, or $1.33 per diluted share, and revenues of $31.4 million for the third quarter of 2018 compared with consolidated income from continuing operations of $3.3 million, or $0.49 per diluted share, and revenues of $21.9 million for the third quarter of 2017.

As a result of NACCO's spin-off of its housewares-related business in September 2017, the attached financial statements and related year-to-date 2017 financial information in this news release have been reclassified to reflect the housewares business' operating results as discontinued operations.

For the nine months ended September 30, 2018, the Company reported consolidated income from continuing operations of $23.8 million, or $3.43 per diluted share, and revenues of $96.3 million compared with consolidated income from continuing operations of $18.8 million, or $2.74 per diluted share, and revenues of $78.3 million for the first nine months of 2017. NACCO's effective income tax rate was 12.7% for the nine months ended September 30, 2018 compared with 19.5% for the nine months ended September 30, 2017.

NACCO ended the third quarter of 2018 with consolidated cash on hand of $83.1 million and debt of $17.5 million. At December 31, 2017, NACCO had consolidated cash on hand of $101.6 million and debt of $58.1 million.

In February 2018, NACCO's Board of Directors authorized a stock buyback program to purchase up to $25 million of the Company's outstanding Class A common stock through December 31, 2019. The Company repurchased approximately 10,400 shares for an aggregate purchase price of $0.3 million since inception of this program, including $0.2 million of stock purchased during the three months ended September 30, 2018.

Consolidated Fourth Quarter 2018 Outlook

In the fourth quarter of 2018, NACCO expects consolidated income from continuing operations before income tax to increase substantially compared with the fourth quarter of 2017, even though the 2017 fourth quarter results included $1.6 million of gains on sales of assets. Excluding the gains on sales of assets, NACCO expects the 2018 fourth-quarter income before income tax to increase primarily due to a decrease in operating expenses, mainly related to lower employee-related costs, and modest improvements at the consolidated operations, excluding Centennial. These improvements are expected to be partially offset by a decrease in royalty income and an increase in Centennial's pre-tax loss.

NACCO Industries, Inc. Outlook - 2019

In 2019, NACCO expects consolidated income before income tax to increase compared with 2018 and expects an effective income tax rate in the range of 11% to 14%. Income before income tax is expected to increase primarily as a result of an increase in royalty income and improved results at the consolidated coal mining operations.

Cash flow before financing activities is expected to increase in 2019 compared with 2018. Capital expenditures are expected to be approximately $19 million in 2019.